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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
AudioText International, Ltd., )
)
)
Complainant, ) File No. EB-03-MD-010
)
v. )
)
AT&T Corp., )
Defendant.
MEMORANDUM OPINION AND ORDER
Adopted: February 13, 2004 Released: February 13,
2004
By the Commission:
I. INTRODUCTION
1. In this Order, we grant in substantial part a formal
complaint that AudioText International, Ltd. (``AudioText'')
filed against AT&T Corporation (``AT&T'') under section 208 of
the Communications Act of 1934, as amended (``Act'').1 AudioText
filed its Complaint pursuant to an order of the United States
District Court for the Eastern District of Pennsylvania referring
certain issues to the Commission under the doctrine of primary
jurisdiction.2 AudioText alleges in the Complaint that AT&T
violated section 203(c)(3) of the Act by engaging in conduct that
was not authorized by AT&T's governing tariff.3 Specifically,
AudioText alleges that AT&T violated the terms of AT&T's tariff,
and thus section 203(c)(3), by suspending service to AudioText,4
refusing AudioText's requests for restoration of service,5 and
demanding that AudioText pay AT&T a security deposit6 and current
charges before they were due.7 As explained below, we conclude
that AT&T violated section 203(c)(3) by suspending and refusing
to restore AudioText's service, and by making demands for a
security deposit and for payment of current charges in
contravention of the governing tariff.
II. FACTUAL BACKGROUND
II.A. The Parties
2. AudioText is a Pennsylvania corporation, with its
principal place of business in Narberth, Pennsylvania.8 At times
relevant to this proceeding, AudioText bought and sold
international long-distance telephone minutes to and from
different carriers and different countries. 9
3. AT&T, a New York corporation, is a national and
international provider of long distance telephone services, as
well as a provider of toll-free 800 services, Internet services,
and transport for 900 services.10
II.B. Contract Tariff 14363
4. The dispute before us involves a long distance service
agreement that AudioText and AT&T entered into on or about August
17, 2000, which was filed as Contract Tariff No. 14363 (``CT
14363'').11 Prior to entering into that agreement, the parties
had operated under an earlier long distance service agreement,
pursuant to which AudioText received service from AT&T beginning
in February 2000.12 During the first several months of 2000,
AudioText had disputed certain charges that AT&T had billed
AudioText, and AT&T had corrected some billing errors in response
to AudioText's inquiries.13 Although some billing disputes
remained at the time AT&T and AudioText entered into CT 14363 in
August 2000,14 AT&T's credit department approved the provision of
service to AudioText under CT 14363.15
5. Under CT 14363, AudioText agreed to purchase a minimum
volume of international minutes from AT&T over a two-year term in
exchange for, among other things, a discounted per-minute rate to
the United Kingdom, where the bulk of AudioText's telephone calls
terminated.16 With the discounts, the rate to the U.K. for
dedicated access was $.058 per minute.17 CT 14363 provides that,
except as otherwise provided in that contract tariff, the
regulations set forth in AT&T Tariff FCC Nos. 1, 2, and 14 apply
to service under CT 14363.18 AudioText began receiving service
under CT 14363 on September 7, 2000.19
II.C. Audiotext's Use Of AT&T's Service To Autodial PNS
Numbers In The U.K.
6. The dispute in this case concerns AudioText's use of
the service it purchased from AT&T under CT 14363 to generate
calls, by means of autodialers, to numbers in the U.K. that began
with the prefix ``070.'' The 070 numbers (hereafter ``PNS
numbers'')20 were associated with a premium service in the U.K.
known as Personal Numbering Service (``PNS''), that enabled end-
users to be called, using a single telephone number, at virtually
any telephone number including mobile numbers.21 The PNS numbers
allowed an end-user who subscribed to PNS to have his/her calls
forwarded from their place of initial receipt to any phone -
mobile or land line - so that the calls were redirected to
`follow' the subscriber traveling from place to place.22
According to AT&T, the charge for calling a PNS number was higher
than the charge for a normal call.23
7. AudioText entered into agreements with three companies
based in the U.K. (``U.K. Companies'') to originate calls from
the United States that were routed over international
telecommunications lines and terminated to PNS numbers in the
U.K.24 AudioText programmed computer software to dial
automatically the U.K. PNS numbers, and autodialed calls to as
many as 5,000 U.K. PNS numbers, based on monthly volumes
requested by the U.K. Companies.25 Many of the autodialed calls
were to PNS numbers that were not associated with individual
users but were, instead, directed to prerecorded messages.26 The
U.K. Companies, who received revenues from the terminated PNS
calls, paid AudioText an average rate of approximately $0.14 per
minute for the calls that AudioText originated that terminated to
one of the U.K. Companies' PNS numbers.27 Because AudioText had
negotiated a discounted rate for international calls under CT
14363, AudioText was required to pay AT&T only $.058 per minute
for the calls that AudioText originated to the PNS numbers in the
U.K. AT&T, however, was required to pay a high access charge of
approximately $.23 per minute for terminating calls to the PNS
numbers.28 Thus, under this arrangement, AudioText made a profit
on each minute of traffic that it originated to the PNS numbers
over AT&T's service. AT&T, on the other hand, suffered a loss on
each minute of such traffic because the per minute rate that AT&T
was required to pay to terminate the PNS traffic in the U.K.
exceeded the per minute rate that AT&T agreed to charge AudioText
for this traffic.
II.D. AT&T's Suspension Of Audiotext's Service On
September 15, 2000
8. Eight days after AudioText began receiving service
under CT 14363, AT&T suspended the service on September 15, 2000,
and thereafter refused AudioText's requests to reinstate the
service. The record evidence regarding this suspension of
service is summarized below.
9. On September 14, 2000, Adam Panagia, a District Manager
in AT&T's Global Fraud group, received information from another
AT&T employee about a pattern of calls to PNS numbers in the U.K.
that appeared to be similar to the traffic associated with a so-
called ``scam'' in south Florida that Panagia had first learned
about in July 2000.29 The Florida traffic involved an individual
who ordered high bandwidth services, such as T1 lines, from U.S.-
based telecommunications carriers, and then used autodialers to
place a high volume of calls over the T1 circuits to PNS number
ranges in the U.K.30 Upon investigating the Florida traffic,
Panagia learned that the PNS range had a very high settlement fee
for terminating calls; that persons in the U.K. would partner
with persons in the U.S. who would negotiate with U.S. carriers,
such as AT&T, to obtain low rates for traffic to the U.K.; and
that the U.S. persons would use autodialers or other artificial
stimulation to generate traffic to the initial point of receipt
served by the PNS range. The U.K. and U.S. persons then shared
the revenue generated from the traffic to the PNS range.31
10. On September 14, 2000, AT&T Labs ran an inquiry in
AT&T's call database, which revealed that AudioText had generated
the second highest volume of traffic to U.K. PNS numbers since
May 1, 2000.32 Panagia then reviewed AudioText's call records on
September 15, 2000, and detected the following patterns: (1)
AudioText's international traffic was predominately to the U.K.
PNS numbers; (2) the volume was estimated to be in excess of
seven million minutes from the time AudioText began receiving
service in February 2000; and (3) there were several very long
calls, over 100 minutes, to the U.K. PNS numbers, and many short
calls.33 Panagia conveyed this information to AT&T in-house
counsel Andrew Schlafly.34
11. Panagia's group also ran a credit check on AudioText
and conveyed the results to Schlafly.35 Schlafly received an e-
mail message from an employee in Mr. Panagia's group on September
15, 2000 indicating that Dun & Bradstreet considered AudioText
``a Low Credit Risk.''36 The message also advised Schlafly that
AudioText had a current bill that was not yet due, and past due
obligation of $22,946.88.37
12. On Friday, September 15, 2000, Schlafly decided to
suspend AudioText's service. Schlafly made the decision before
4:00 p.m. that day, after speaking with Panagia.38 The decision
to suspend was based in part on the volume of the traffic
AudioText had generated since February 2000 that had terminated
to U.K. PNS numbers.39
13. At about 4:30 p.m. on September 15, 2000, Panagia
telephoned AudioText's president, Hausman, and asked if Hausman
was aware that a substantial volume of AudioText's traffic was
going to the U.K. Hausman acknowledged awareness of that fact.40
Panagia asked Hausman if he realized that the traffic was
predominantly going to U.K. PNS or cellular numbers. Hausman
acknowledged that he did.41 Panagia and Hausman discussed
whether the traffic was fraudulent, and Hausman said that it was
not.42 AT&T suspended AudioText's service at about 4:45 PM on
September 15, 2000.43
14. Schlafly sent a certified letter to Hausman, dated
September 15, 2000, stating that AT&T was suspending AudioText's
service immediately because:
AT&T has determined that Audiotext . . . is generating
an extra-ordinary volume of calls from its circuits
terminating on [PNS] numbers in the [U.K.]. . . ..
Audiotext . . . currently has substantial unpaid
obligations to AT&T, some of which is [sic] past due.
Moreover, this traffic appears to us as though it may
include fraudulent use of telecommunication services.44
15. Following the suspension of service, the parties
exchanged a series of letters over a three-week period.45 In
letters to AT&T, AudioText's president, Hausman, and its outside
counsel, Stephen Burns, denied that AudioText was engaged in any
fraud, asserted that AT&T's actions were without justification,
and demanded that AT&T restore AudioText's service.46 AT&T sent
letters to AudioText advising AudioText that its account was past
due, and demanding that AudioText provide a security deposit and
pay its current balance ``in full.''47 In response, AudioText
denied that it had any unpaid obligations to AT&T, and accused
AT&T of failing promptly to issue credits to AudioText for past
overcharges.48 AudioText never provided a security deposit to
AT&T, and AT&T never restored AudioText's suspended service.49
II.E. The District Court's Referral
16. On October 4, 2000, AudioText filed a complaint against
AT&T in the United States District Court for the Eastern District
of Pennsylvania (``District Court'') charging AT&T with breach of
contract and of the covenant of good faith and fair dealing.50
AT&T answered the complaint and asserted the affirmative defense
that its services to AudioText were governed by tariffs on file
with the Commission and that its actions with respect to
AudioText were authorized and lawful under those filed tariffs.51
AT&T alleged that AudioText's claims were barred by its tariffs,
the Act, and the filed tariff doctrine.52 AT&T asserted
additional affirmative defenses, and counterclaimed for unpaid
service bills.53
17. In December 2001, AT&T filed a motion in the District
Court to dismiss AudioText's complaint or, in the alternative, to
dismiss it without prejudice to its submission to the Commission
for disposition pursuant to the primary jurisdiction doctrine.54
The District Court ordered that AudioText may submit its claims
to the Commission, and stayed all further proceedings in the case
pending completion of administrative proceedings before the
Commission.55 In August 2002, AudioText filed a second complaint
with the District Court charging that AT&T violated section 201
of the Act and its tariff by terminating AudioText's services and
blocking its traffic.56 In November 2002, the District Court
consolidated AudioText's two suits and stayed both pending
referral to the Commission for disposition.57
18. AudioText filed the instant Complaint with the
Commission on May 13, 2003.58 The Complaint originally contained
twelve separate counts; however, following the initial status
conference in this matter, AudioText withdrew Counts I, II, III,
and XII from the Complaint.59 In the remaining counts, AudioText
alleged that AT&T violated the terms of the governing AT&T tariff
and, thus, section 203(c)(3) of the Act, by suspending
AudioText's service without authorization (Counts IV and V);60
refusing AudioText's requests for reinstatement of service
(Counts VI);61 making an unauthorized demand for a security
deposit (Counts VIII, IX, and X);62 and demanding payment of
current charges that were not yet due (Count XI).63 AT&T filed
an Answer denying all of the allegations in the Complaint, and
asserting affirmative defenses.64
III. DISCUSSION
III.A. AT&T's Suspension Of Audiotext's Service Was Not
Authorized By The Tariff And Thus Violated Section
203(c)(3) Of The Act.
19. In Counts IV and V of the Complaint, AudioText alleges
that AT&T's suspension of AudioText's service on September 15,
2000 violated section 203(c)(3) of the Act.65 Section 203(c)(3)
provides, in pertinent part, that no carrier shall ``employ or
enforce any classifications, regulations, or practices affecting
[its] charges except as specified in [its filed tariff].''66
AudioText claims that AT&T's suspension of service was not
authorized by the terms of the applicable tariff, and thus
constituted a violation of section 203(c)(3).67 AT&T disputes
this claim, asserting that its suspension of AudioText's service
was authorized by its tariff.68
20. Both parties rely on sections 2.9.6 and 2.2.4.B. of
AT&T Tariff No. 1 to support their contentions as to the
lawfulness of the suspension of service under section
203(c)(3).69 Section 2.9.6., which is entitled ``Fraudulent Use
Of LDMTS [long distance message telephone service] To Avoid
Payment Of Tariffed Charges,'' provides that ``[i]n order to
control fraud in any instance in which the Company has reason to
believe that a Customer is using LDMTS in violation of Section
2.2.4.B., the Company may, after complying with the requirements
of this sub-section, immediately and upon written notice to the
Customer . . . restrict, suspend, or discontinue providing the
service.''70
21. Section 2.2.4., entitled ``Fraudulent Use,'' states
that the ``fraudulent use of, or the intended or attempted
fraudulent use of LDMTS is prohibited,''71 and then lists
``activities that constitute fraudulent use'' in separate
subsections.72 Section 2.2.4.B. prohibits ``[u]sing or
attempting to use'' AT&T's long distance services ``with the
intent to avoid the payment, either in whole or in part, of any
of [AT&T's] tariffed charges''73 by (1) ``[r]earranging,
tampering with, or making connections'' not authorized by Tariff
1 to ``any service components used to furnish'' long-distance
service;74 or (2) ``[u]sing fraudulent means or devices, tricks,
schemes, false or invalid numbers, false credit devices, or
electronic devices, whether directed at the Company or
others.''75
III.A.1. AT&T Had No Basis To Conclude That Audiotext
Was Using The Service In Violation Of Section
2.2.4.B. Of The Tariff.
22. By its plain terms, section 2.9.6. grants AT&T
authority to suspend service only in instances where AT&T ``has
reason to believe that a customer is using LDMTS in violation of
Section 2.2.4.B. . . ..''76 In determining the lawfulness of
AT&T's suspension of AudioText's service in September 2000, we
must therefore examine whether AT&T had reason to believe that
AudioText was using AT&T's service in violation of section
2.2.4.B. at the time it suspended service.
23. AT&T contends that it had reason to believe that
AudioText was violating section 2.2.4.B., and was therefore
authorized to suspend service under section 2.9.6., because
AudioText's alleged increase in volume of usage and peculiar
calling pattern suggested that AudioText, or one of its
customers, ``was using a fraudulent trick or device in violation
of the tariff.''77 For the following reasons, we disagree.
24. Even if AudioText's use of autodialers to call PNS
numbers could be considered a ``fraudulent trick or device,''
AT&T has not established that it had reason to believe that
AudioText was ``using or attempting to use'' AT&T's long distance
services ``with the intent to avoid the payment . . . of any of
[AT&T's] tariffed charges,'' which is the only activity
specifically prohibited by section 2.2.4.B.78 To the contrary,
the evidence shows that AT&T believed that AudioText was using
the autodialers as part of a scheme under which AudioText would
profit from the difference between the tariffed charges it would
pay AT&T for service under CT 14363, and its portion of the call
termination fees that AudioText's partners in the U.K. collected
and agreed to share with AudioText. The record evidence shows
that AT&T understood that, under this arrangement, AudioText had
every incentive to continue paying AT&T for its tariffed
services, because that was how AudioText would continue to profit
from this arbitrage.
25. AT&T manager Adam Panagia testified that, after he
learned of an emerging ``scam'' involving the PNS service in the
U.K. in July of 2000,79 he investigated further and found that
the PNS range had a very high settlement fee (i.e.,
access charge for terminating calls. . .) and that
operators in the U.K. would partner with people in the
U.S. who would approach U.S. carriers, like AT&T, MCI
WorldCom, and Sprint, and negotiate attractive (low)
rates for traffic to the U.K. and who then would use
autodialers or other false stimulation to create
excessive traffic to the initial point of receipt
served by the PNS range. The U.K. and U.S. individuals
then share the revenue generated from the excessive
traffic to the PNS range.80
When Panagia later notified an industry task force about this
practice in November 2000, he described it as ``arbitrage'' to
the U.K. and explained: ``The originator may be paying 5 cents a
minute to the carrier and the PNS operator may be receiving 18
cents a minute resulting in the carrier losing 13 cents a minute
due to the higher settlement charges.''81
26. The record does not establish that AT&T was concerned,
at the time it terminated AudioText's service in September 2000,
that the U.S. originators of the traffic to U.K. PNS numbers,
such as AudioText, intended to avoid payment of tariffed
charges.82 Indeed, an e-mail communication from AT&T manager
Bill Robb,83 sent on the day AT&T suspended AudioText's service,
shows that AT&T understood that the ``upside'' for AudioText in
the PNS autodialing ``scam'' was the profit that AudioText stood
to make from the difference between the rate AudioText was paying
AT&T for long distance service and the portion of the 23 cent
settlement fee that the U.K.-based companies returned to
AudioText.84
27. Although AT&T may have had legitimate concerns about
AudioText's behavior, AT&T was still obligated to comply with its
tariff. The relevant provisions of the Tariff provide for
termination of a customer's service only when AT&T has reason to
believe that the customer is attempting to avoid the payment of
tariffed charges, not when AT&T is concerned generally about
fraud or arbitrage. 85 Because AT&T did not have a reason to
believe that AudioText intended to avoid paying AT&T's tariffed
charges, AT&T's termination of AudioText's service was not
authorized by the tariff and, therefore, violated section
203(c)(3).
III.A.2. AT&T Cannot Justify Its Suspension Of Service
On The Ground That AudioText Was Allegedly Placing
An ``Extraordinarily High Volume Of Calls.''
28. We also reject AT&T's contention that its suspension of
AudioText's service in September 2000 was authorized by
subsection 2.9.6.A. because AudioText allegedly had placed an
``extraordinarily high volume of calls'' at the time of the
suspension.86 Section 2.9.6.A. of Tariff No. 1 sets forth
requirements that must be met in order for AT&T to suspend
service ``in instances where AT&T ``has reason to believe that a
Customer is using LDMTS in violation of Section 2.2.4.B.''87
Section 2.9.6.A. provides that AT&T may restrict or suspend
service if it determines that a customer is placing an
``extraordinarily high volume of calls'' and AT&T fails to
receive ``satisfactory assurances'' from the customer that the
customer ``is not using the service in violation of Section
2.2.4.B.''88 An ``extraordinarily high volume of calls'' is
defined as ``the volume of calls in any 24-hour period which, if
continued at that rate for a period of one month, would exceed at
least three times the Customer's estimated monthly usage charges
for that service (as determined by the lower of the Customer's
designated monthly minimum usage commitment for that service, if
any, or the immediately preceding month's usage charges).''89
29. AT&T's arguments based on subsection 2.9.6.A. fail for
two independent reasons. First, Section 2.9.6.A. applies only in
instances where AT&T has reason to believe that a customer is
using long distance service to avoid payment of tariffed charges
in violation of Section 2.2.4.B. This conclusion is evident from
the title, ``Fraudulent Use Of LDMTS To Avoid Payment Of Tariffed
Charges,'' that appears over section 2.9.6. and all of its
subsections,90 and from the text of Section 2.9.6.A, which allows
AT&T to suspend service only where it fails to receive
``satisfactory assurances'' that the customer ``is not using the
service in violation of Section 2.2.4.B.'' 91 Section 2.2.4.B.,
as we have noted, applies only to actions taken ``with the intent
to avoid the payment, either in whole or in part, of any of
[AT&T's] tariffed charges.''92 Because, as shown above, AT&T had
no reason to believe that AudioText was engaged in activities
that constituted fraudulent use of service under section
2.2.4.B., it lacked authority to initiate the suspension of
service procedures of section 2.9.6.A., regardless of the volume
of calls.
30. Moreover, an examination of the evidence concerning
call volume provides us with a second, independent basis to
conclude that AT&T's suspension of AudioText's service was not
authorized by section 2.9.6.A. There is no evidence in the
record that AT&T ever determined that AudioText had placed ``an
extraordinarily high volume of calls'' under section 2.9.6.A. at
the time AT&T suspended AudioText's service. AT&T has failed to
show that, prior to suspending service, it examined calling data
and found that AudioText had placed ``an extraordinarily high
volume of calls'' under section 2.9.6.A., i.e., that ``the volume
of calls [AudioText had placed] in any 24-hour period . . . if
continued at that rate for a period of one month, would exceed at
least three times [AudioText]'s estimated monthly usage charges
for that service (as determined by the lower of [AudioText]'s
designated monthly minimum usage commitment for that service, if
any, or the immediately preceding month's usage charges).''93
Although AT&T proffered sworn declarations from two witnesses who
testified that they considered call records for AudioText at the
time AT&T suspended AudioText's service,94 neither declarant
provides evidence that AT&T determined, at the time it decided to
suspend service, that AudioText's call volume in any 24-hour
period met the test for ``an extraordinarily high volume of
calls'' set forth in section 2.9.6.A.
31. The undisputed evidence concerning AudioText's calling
volume indicates that AT&T could not have satisfied the
``extraordinarily high volume'' test set out in section 2.9.6.A.,
even if it had tried to do so. In determining the calling volume
that would have satisfied that test, we must measure AudioText's
calling volume in a 24-hour period against the ``immediately
preceding month's usage charges,'' because there was no minimum
monthly usage commitment set forth in CT 14363.95 The parties
agree that, in the billing period immediately preceding September
15, 2000, which ran from August 7 to September 6, 2000, AT&T
charged AudioText $118,760.92 for 1,679,991.616 minutes of use.96
Accordingly, to place an ``extraordinarily high volume of calls''
within the meaning of section 2.9.6.A., AudioText would have had
to incur charges totaling $11,876.09 (3 ´ $118,760.92 ¸ 30)
and/or place at least 167,999.161 billable minutes during one 24-
hour period (3 ´ 1,679,991.616 ¸ 30). There is no evidence that
such usage occurred. In the nine days between September 7 and
September 15, 2000, AudioText incurred 428,139.850 minutes of
traffic for a usage charge of $39,567.38.97 If all days in that
period saw an equal amount of traffic, AudioText incurred charges
during that period at an average rate of $4,396.38 per day, for
an average of 47,571.094 minutes of use per day.98 This is
substantially less than the $11,876.09 and 167,999.161 minute
threshold that AudioText would have had to meet under the
``extraordinarily high volume'' test in section 2.9.6.A.99
32. In sum, because AT&T did not determine that AudioText
had placed an ``extraordinarily high volume of calls,'' it had no
right under section 2.9.6.A. to contact AudioText and demand
assurances that AudioText was ``not using the service in
violation of Section 2.2.4.B.,''100 and then suspend service when
it allegedly failed to receive such assurances. By proceeding to
suspend the service anyway, AT&T violated section 2.9.6. of
Tariff No. 1 and thus section 203(c)(3) of the Act.
III.A.3. AT&T's Arguments Based On Sections 2.9.6.B.
And 2.9.6.D. Of The Tariff Also Lack Merit.
33. AT&T's attempt to rely on sections 2.9.6.B. and
2.9.6.D. of Tariff No. 1 to justify its suspension of AudioText's
service is similarly unavailing.101 Under § 2.9.6.B., AT&T may
refuse to provide service if the customer's acts or the
conditions on its premises are ``consistent with patterns of
known fraudulent activity such as to indicate an intention to
defraud [AT&T] once [service] is provided.''102 Section 2.9.6.D.
permits AT&T temporarily to restrict access to its network from
any specific line ``when a pattern of calling on that line is
consistent with known patterns of fraudulent calling.''103
Again, because section 2.9.6. applies only where AT&T has reason
to believe there is a violation of section 2.2.4.B., the term
``intention to defraud'' in section 2.9.6.B. and the term
``fraudulent calling'' in section 2.9.6.D. refer to use of AT&T's
service with the intent to avoid payment of AT&T's tariffed
charges in violation of section 2.2.4.B. As discussed above,
AudioText's conduct did not indicate such intent.
III.A.4. AT&T's Attempts To Vary Or Enlarge The Rights
Defined By Its Tariff Must Also Be Rejected.
34. AT&T cites a number of authorities purportedly holding
that a carrier is permitted to block or suspend service where the
carrier suspects that the customer is using the service in
violation of the tariff, or in a manner indicative of fraud and
abuse.104 AT&T's implicit suggestion is that its suspension of
AudioText's service was authorized even if AudioText was not
engaged in ``fraud'' as specifically defined in the tariff. We
are not permitted, however, to decide AudioText's section 203(c)
claims based on common law, statutory, or other definitions of
fraud that differ from the definition set forth in section 2.2.4.
of Tariff No. 1. As the Supreme Court affirmed in American Tel.
& Tel. Co. v. Central Office Tel., under the filed tariff
doctrine, ```the rights as defined by the tariff cannot be varied
or enlarged by either contract or tort of the carrier.'''105
Indeed, AT&T plainly acknowledges in another portion of the
record that its tariffs ``define and limit AT&T's rights and
obligations with respect to the provision of long-distance
service, including AT&T's authority to block or suspend traffic
from foreign countries in order to prevent suspected fraud or
abuse, unlawful use, or the non-payment of services.''106 In
this case, AT&T's authority to suspend traffic under section
2.9.6. of the tariff is expressly limited by the definition of
``fraudulent use'' set forth in section 2.2.4.B., and we have no
discretion to re-write the tariff to make it cover conduct
falling outside those limitations. Accordingly, we find AT&T's
cited authorities to be inapposite, because none involves the
application of tariff provisions that specifically defined the
circumstances under which AT&T could terminate service for
fraud.107
35. Although we by no means endorse the kind of business
conduct that AudioText admittedly engaged in here, we have no
authority to depart from the well-settled filed tariff doctrine
simply because we wish to censure certain business conduct.
Instead, the Act places the burden on carriers such as AT&T to
protect themselves against customer conduct they deem unfair or
undesirable by incorporating appropriate safeguards in their
contract and/or tariff provisions. In this case, AT&T failed to
take such protective measures before contracting with AudioText.
Accordingly, because we find that AT&T's suspension of
AudioText's service on September 15, 2000 was not authorized
under section 2.9.6. of the tariff, we rule in AudioText's favor
on these counts.
III.B. AT&T's Refusal To Reinstate Audiotext's Service
Violated The Tariff And Thus Section 203(c)(3) Of The Act.
36. In Count VI of the Complaint, AudioText alleges that
AT&T's refusal to reinstate AudioText's service in September 2000
was impermissible under section 2.9.6.A. of Tariff No. 1 and thus
violated section 203(c)(3) of the Act. 108 Section 2.9.6.A. of
Tariff No. 1 provides that, where a customer's service has been
restricted, suspended, or discontinued, the service ``will be
reinstated'' if AT&T ``receives satisfactory assurances within
ten days'' that the customer was not using the service ``in
violation of § 2.2.4.B.,'' or if AT&T receives ``an appropriate
deposit pursuant to Section 2.5.6.''109
37. AudioText alleges that AT&T should have reinstated
AudioText's service, because AudioText provided AT&T with
assurances that it was not making fraudulent use of AT&T's
service, and AT&T knew that AudioText was not using the service
with the intent to avoid the payment of tariffed charges in
violation of section 2.2.4.B.110 AT&T denies these
allegations,111 arguing that the purported ``assurances'' it
received from AudioText were in no way ``satisfactory'' within
the meaning of the tariff.112
38. Section 2.9.6.A. provides for reinstatement of service
in instances where AT&T has suspended, restricted or discontinued
service in accordance with the terms of that section.113 As
discussed above, AT&T's suspension of AudioText's service was not
authorized under section 2.9.6.A., because AT&T had no reason to
believe that AudioText was using AT&T's service in violation of
section 2.2.4.B. of the tariff.114 Consequently, AT&T was not
authorized under section 2.9.6.A. to demand assurances that
AudioText was not violating section 2.2.4.B. as a condition for
reinstating AudioText's service. Thus, we conclude that AT&T's
refusal to reinstate AudioText's service violated section
203(c)(3) of the Act,115 by imposing conditions on the service
that were not specified in the tariff.116
III.C. AT&T's Unauthorized Demand For A Security Deposit
And For Payment Of Current Charges Violated The Tariff And
Thus Section 203(c)(3) Of The Act.
39. In Counts IX and XI of the Complaint, AudioText alleges
that AT&T violated section 203(c)(3) of the Act by demanding that
AudioText pay a security deposit,117 and pay current charges not
yet due,118 when such demands were not authorized by the
governing tariff. For the reasons set forth below, we conclude
that AT&T did in fact make unauthorized demands for a security
deposit and for payment of current charges in violation of
section 203(c)(3) of the Act.
40. The facts relevant to these claims are largely
undisputed. On September 20 and/or September 25, 2000, AT&T
manager Adam Panagia faxed a letter to AudioText's president,
James Hausman, informing AudioText that its account with AT&T had
``a past due amount of $41,202.13 with current charges of
$126,383.67,'' and stating that ``AT&T is requesting that the
total $167,585.80 be paid in full to bring the account
current.''119 The Demand Letter stated further: ``If it is your
intention to continue to do business with AT&T, we are requesting
a deposit of $828,923.00 based on the recent and unexpectedly
large amount of traffic that AudioText . . . is generating.''120
As both parties agree, the past due amount of $41,202.13
identified in AT&T's letter was apparently inaccurate, since
AT&T's records showed on September 20, 2000 that AudioText's
account had a past due amount of either $22,946.88 or
$24,077.13.121
III.C.1. AT&T's Demand For A Security Deposit In The
Amount Of $828,923 Was Unauthorized.
41. We address first AT&T's demand for a security deposit
of $828,923.00. AT&T contends that its demand for a security
deposit was authorized by section 2.5.6.A. of Tariff No. 1, and
thus was just and reasonable under Section 203(c)(3) of the
Act.122 Section 2.5.6.A. of Tariff No. 1 permits AT&T to require
a security deposit from a customer ``(1) who has a proven history
of late payments to the Company or (2) whose financial
responsibility is not a matter of record . . . .''123 To
determine the ``financial responsibility'' of a customer for
purposes of 2.5.6.A., AT&T ``will rely on commercially reasonable
factors to assess and manage the risk of nonpayment,''124
including ``payment history for telecommunications service, the
number of years in business, history of service with AT&T,
bankruptcy history, current account treatment status, financial
statement analysis, and commercial credit bureau rating.''125
Section 2.5.6.A. further provides that the amount of the deposit
``will not exceed three times the sum of the estimated average
monthly usage charges and/or the monthly service charges.''126
42. AudioText contends in Count IX that AT&T's demand for a
deposit was unauthorized because section 2.5.6.A. of Tariff No. 1
did not permit AT&T to demand a deposit in the amount of
$828,923.127 As noted above, Section 2.5.6.A. provides that the
amount of the deposit ``will not exceed three times the sum of
the estimated average monthly usage charges and/or the monthly
service charges.''128 AT&T concedes that, at the time it
demanded a deposit of $828,923, AudioText's highest monthly usage
and service charges totaled less than $119,000, which covered the
period August 7 to September 6, 2000.129 Under the standards set
forth in section 2.5.6.A., a demand for a deposit in the amount
of $828,923 would have been justified only if AudioText's
estimated average monthly usage and service charges totaled at
least $276,307 ($828,923 ÷ 3).130 AT&T admits that there is no
basis on which it could have determined that the sum of
AudioText's estimated average monthly usage and service charges
was as high as $276,307.131 Thus, section 2.5.6.A. did not
authorize AT&T to demand a deposit in the amount of $828,923.
43. AT&T nevertheless attempts to justify its demand for a
deposit of $828,923 by arguing that this figure was
``negotiable,'' and that AT&T ``was willing to consider a figure
much lower'' than that amount.132 We reject this argument for at
least two reasons. First, we are not persuaded by AT&T's
assertion that the amount of the security deposit was negotiable.
That assertion, which is supported by a declaration from former
AT&T in-house lawyer, Schlafly, 133 is undermined by the
contemporaneous record of events. Specifically, the letter that
AT&T manager Adam Panagia sent to AudioText on September 20
and/or September 25, 2000 indicated that payment of the $828,923
deposit was a condition of restoring AudioText's suspended
service, stating: ``If it is your intention to continue to do
business with AT&T, we are requesting a deposit of $828,923.00 .
. . .''134 Further, it is clear from AudioText's contemporaneous
correspondence with AT&T that AudioText did not understand AT&T
to have made a ``negotiable'' demand for a deposit. A September
25, 2000 letter that AudioText's counsel, Stephen Burns, sent to
Schlafly recounted that ``on September 22nd . . . AT&T demanded a
deposit of $828,923 as a condition of restoring service.''135 In
response, Schlafly sent a letter to Burns the following day
stating that AT&T had previously sent AudioText a ``demand'' for
payment of ``a deposit based on the recent usage.''136 Nowhere
in the letter did Schlafly indicate that the amount of the
deposit was negotiable.137 On September 26, 2000, Burns sent
Schlafly another letter in which he stated that AT&T's ``demand
for a security deposit of $828,923 is patently ridiculous and
impossible to comply with'' and asking Schlafly to provide ``some
justification for this number. . . .''138 The record contains no
responding letter from AT&T advising AudioText that the $828,923
amount was negotiable, or explaining how it was calculated.139
44. More importantly, the tariff did not authorize AT&T to
demand that AudioText pay a deposit amount that exceeds the
dollar limits set forth in section 2.5.6.A., regardless of
whether AT&T was willing to negotiate a lesser deposit in the
event AudioText balked at paying the $828,923. Indeed, to allow
AT&T to demand that customers pay deposits in amounts that exceed
the limits set forth in section 2.5.6.A. of Tariff No. 1, and
then negotiate different deposit amounts that might or might not
fall within the scope of the Tariff, would undermine the
antidiscriminatory policy that lies at ``'the heart of the
common-carrier section of the Communications Act.'''140 This we
decline to do. We therefore conclude that AT&T violated section
203(c)(3) of the Act by demanding a deposit in the amount of
$828,923, which could not be justified under the dollar limits
set forth in section 2.5.6.A. of the Tariff.141
III.C.2. AT&T's Demand For Payment Of Current Charges
Was Unauthorized.
45. In addition to requesting payment of a deposit of
$828,923, the Demand Letter that AT&T sent to AudioText on
September 20 and/or September 25, 2000 asked AudioText to pay
$167,585.80 ``in full to bring [its] account current.''142 AT&T
admits that, as of September 15, 2000, its counsel, Schlafly,
knew that the current portion of AudioText's bill was
$126,383.67, and that portion was not due until October 7,
2000.143 AT&T further admits that its records showed on
September 20, 2000 that AudioText's account had a past due amount
of either $22,946.88 or $24,077.13.144
46. Section 2.5.4. of Tariff No. 1 provides that ``any
amounts for which payment has not been received within 30
calendar days of the invoice date will be considered
delinquent.''145 AudioText alleges in Count XI that AT&T did not
act in accordance with the Tariff, and thus violated 203(c)(3) of
the Act, when it demanded payment of $167,585.80 from AudioText
when payment of that amount was not yet due.146 We agree.
47. In defense of Count XI, AT&T merely asserts that
``[b]ecause AudioText had past charges due on September 15, 2000,
AT&T was entitled under the tariff to require payment of past due
charges on AudioText's account.''147 AT&T argues that ``neither
Section 203(c)(3) of the Act or the tariff itself prohibit AT&T
from `requesting' payments that are already overdue.''148 This
argument, however, does not explain how AT&T's demand for
immediate payment of $167,585.80 was authorized under the Tariff
when, according to AT&T's own records, less than $25,000 of that
amount was past due. We therefore reject AT&T's defense to Count
XI and find that AT&T violated section 2.5.4. of the Tariff, and
thus section 203(c)(3) of the Act, by demanding immediate payment
of $167,585.80, when most of that amount was not yet due.
IV. CONCLUSION
48. For the forgoing reasons, we conclude that AT&T
violated section 203(c)(3) of the Act by suspending and refusing
to restore AudioText's service in September 2000, and by
demanding that AudioText provide a security deposit of $828,923,
and pay current charges not yet due. We find that these actions
were not authorized or lawful under the Tariff then governing
AT&T's provision of service to AudioText.149
V. ORDERING CLAUSES
49. ACCORDINGLY, IT IS ORDERED, pursuant to sections 1,
4(i), 4(j), 208 and 203 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 208, and 203, that the
formal Complaint filed by AudioText International, Ltd. against
AT&T Corporation IS GRANTED in part as follows:
a) Counts IV, V, VI, IX and XI of the Complaint are
GRANTED; and
b) Counts VII, VIII and X of the Complaint are
DISMISSED without prejudice.150
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
_________________________
1 47 U.S.C. § 208. See Formal Complaint, File No. EB-03-MD-
010 (filed May 13, 2003) (``Complaint'').
2 See Appendix to Complaint (``Complaint App.'') at 565-66;
587; Joint Statement of the Parties, File No. EB-03-MD-010 (filed
July 23, 2003) (``Joint Statement'') at 34-35, ¶¶ 181-93.
3 47 U.S.C. § 203(c)(3).
4 Complaint at 43-48, ¶¶ 269-303.
5 Complaint at 48-49, ¶¶ 304-312. AudioText also alleges that
AT&T's refusal to grant AudioText's reasonable request for
restoration of service violated section 201(a) of the Act, 47
U.S.C. § 201(a). Complaint at 49-50, ¶¶ 313-320. For the
reasons discussed in Part III.B below, we conclude that we need
not address AudioText's section 201(a) claim in this Order.
6 Complaint at 50-53, ¶¶ 321-46.
7 Complaint at 53-54, ¶¶ 347-59.
8 Joint Statement at 2, ¶ 1.
9 Joint Statement at 2, ¶ 6.
10 Joint Statement at 3, ¶¶ 10-11.
11 AT&T and AudioText entered into an agreement, known as the
Master Agreement, on or about August 17, 2000. AT&T implemented
the terms of the Master Agreement by filing with the Commission
Contract Tariff No. 14363 (``CT 14363''), which became effective
on August 25, 2000. Joint Statement at 16-17, ¶¶ 96-100. The
Master Agreement and CT 14363 are hereafter collectively referred
to as ``CT 14363.''
12 See Joint Statement at 21, ¶ 128.
13 See Joint Statement at 7-16, ¶¶ 42-95.
14 See Joint Statement at 16, ¶¶ 94-96.
15 Joint Statement at 18, ¶ 107.
16 AudioText agreed to a Voice Minimum Annual Revenue
Commitment (``VMARC'') of $240,000 in gross international usage
for the first year, and $480,000 in gross international usage for
the second year of its two-year term, before the application of
the discounts. Joint Statement at 16, ¶ 96.
17 Joint Statement at 17, ¶ 98.
18 Joint Statement at 30, ¶ 167; Exhibits To AT&T Answer Of
AT&T Corp., File No. EB-03-MD-010 (filed June 16, 2003) (``AT&T
Ex.'' 1 through 87) at AT&T Ex. 18.
19 Joint Statement at 17, ¶ 100.
20 The 070 numbers were allocated by the U.K. regulatory
authority, Oftel (Office of Telecommunications). Joint Statement
at 22-23, ¶¶ 131-32. See AT&T Ex. 13. Oftel has since been
replaced by a new U.K. regulatory authority known as Ofcom
(Office of Communications).
21 See AT&T Ex. 13 at 2.
22 AT&T Ex. 40, Panagia Decl., at 2, ¶ 4. See AT&T Ex. 13 at
2, 9-10. End-users in the U.K. received PNS from entities known
as ``Personal Numbering Service Providers'' (PNSPs), which were
not necessarily network operators. AT&T Ex. 13 at 2, 10. PSNPs
allocated PNS numbers to individual end-users. AT&T Ex. 13 at 2.
23 Supplemental AT&T Answer of AT&T Corporation, File No. EB-
03-MD-010 (filed June 26, 2003) (``AT&T Answer'') at 4. AT&T
asserts that the charge was higher for the PNS calls in part
because PNS service was expected to involve a mix of landline and
mobile communications. Id.
24 Joint Statement at 2, ¶ 2; 24, ¶ 139.
25 Joint Statement at 24, ¶ 139.
26 Joint Statement at 24, ¶ 139. An AT&T manager who
personally called some of the PNS numbers to which AudioText was
sending traffic reported that he heard two prerecorded messages
that, respectively, discussed adult entertainment and advertised
watches for sale. Both messages lasted no more than a few
minutes, and then ``looped'' back and repeated the message. AT&T
Ex. 40, Panagia Decl., at 3-4, ¶ 8.
27 Joint Statement at 2, ¶ 3; 24, ¶ 139. It is not clear from
the record whether the U.K. Companies who agreed to pay AudioText
for originating calls to the PNS numbers collected revenues for
the termination of calls to the PNS numbers directly, or through
a sharing revenue arrangement with another U.K. entity, who
collected revenues for the termination of these calls.
28 AT&T Ex. 24; Joint Statement at 25-26, ¶ 148-49.
29 AT&T Ex. 40, Panagia Decl., at 2-3, ¶¶ 3-7.
30 AT&T Ex. 40, Panagia Decl., at 2, ¶ 3.
31 AT&T Ex. 40, Panagia Decl., at 2-3, ¶ 5.
32 AT&T Ex. 40, Panagia Decl., at 3, ¶ 7; Joint Statement at
23, ¶ 134; AT&T Ex. 22.
33 AT&T Ex. 40, Panagia Decl., at 3-4, ¶¶ 8-9; Joint Statement
at 23, ¶ 133.
34 AT&T Ex. 40, Panagia Decl., at 3-4, ¶ 9; Joint Statement at
24, ¶ 141.
35 AT&T Ex. 40, Panagia Decl., at 4-5, ¶ 10; Complaint App. at
453.
36 Complaint App. at 453; Joint Statement at 30, ¶ 166.
37 Complaint App. at 453.
38 Joint Statement at 27, ¶ 153; Complaint App. at 444.
39 Joint Statement at 24, ¶ 140.
40 AT&T Ex. 40, ¶ 12; Joint Statement at 25, ¶ 142.
41 Joint Statement at 25, ¶ 143; AT&T Ex. 40, ¶ 12.
42 Joint Statement at 25, ¶ 144; AT&T Ex. 40, ¶ 12.
43 Joint Statement at 24, ¶¶ 137-38; Complaint App. at 273.
44 Joint Statement at 27, ¶ 153; Exhibits To Supplemental AT&T
Answer Of AT&T Corp., File No. EB-03-MD-010 (filed June 26, 2003)
(``AT&T Ex.'' 88 through 94) 88, Schlafly Decl., at 2, ¶ 3; AT&T
Ex. 47, at 34-37.
45 See Joint Statement at 26-30, ¶¶ 150-65.
46 Joint Statement at 27, ¶ 154; 27-28, ¶ 157; Complaint App.
at 312, 317-19.
47 Joint Statement at 27, ¶ 155; 29-30, ¶¶ 162, 164-65;
Complaint App. at 309, 320, 322, 327, 335-38, 343-49, 353. AT&T
provided AudioText with conflicting information as to the amount
by which its account allegedly was past due. On September 18,
2000, AT&T advised AudioText that it had a past due balance of
$24,077.13. Joint Statement at 27, ¶ 155; Complaint App. at 309.
On September 20 and/or September 25, 2000, AT&T advised AudioText
that its past due balance totaled $41,202.13. Joint Statement at
29-30, ¶ 164; Complaint App. at 320, 321. These contradictory
communications with AudioText are curious in view of AT&T's
admission that its records showed on September 20, 2000 that
AudioText's account had a past due amount of either $22,946.88 or
$24,077.13. Joint Statement at 29, ¶ 161.
48 Joint Statement at 27-28, ¶ 157; Complaint App. at 312, 317-
19, 323-25, 329, 332-33, 339-42, 351, 362-63.
49 See Complaint at 49, ¶ 311; 50, ¶ 320; AT&T Answer at 127, ¶
390; Complaint App. at 362-63.
50 Joint Statement at 34, ¶ 181.
51 Joint Statement at 34, ¶ 182.
52 Joint Statement at 34, ¶ 182.
53 Joint Statement at 34, ¶ 182-83.
54 Joint Statement at 34, ¶ 186.
55 Joint Statement at 35, ¶ 191.
56 Joint Statement at 35, ¶ 192.
57 Joint Statement at 35, ¶ 193.
58 Formal Complaint, File No. EB-03-MD-010 (filed May 13,
2003).
59 Letter from Andrew S. Kasman, Counsel for AudioText, to
Christopher N. Olsen and Lisa J. Saks, Market Disputes Resolution
Division, Enforcement Bureau, File No. EB-03-MD-010 (filed Aug.
15, 2003) (stating that ``Audiotext [sic] hereby withdraws Counts
I, II, III and XII from its Complaint in this matter'').
60 Complaint at 43-48, ¶¶ 269-303.
61 Complaint at 48-49, ¶¶ 304-312. AudioText further alleges
in Count VII that AT&T's refusal to grant AudioText's reasonable
request for restoration of service violated section 201(a) of the
Act. Complaint at 49-50, ¶¶ 313-20.
62 Complaint at 50-53, ¶¶ 321-46.
63 Complaint at 53-54, ¶¶ 347-59.
64 See AT&T Answer.
65 Complaint at 43-48, ¶¶ 269-303.
66 47 U.S.C. § 203(c)(3).
67 Complaint at 46, ¶ 286;
68 See AT&T Answer at 126, ¶ 389.
69 See Complaint at 44-48, ¶¶ 274-86; 46-48, ¶¶ 288-303; AT&T
Answer at 126, ¶ 389; AT&T Answer, Legal Analysis at 32-37, ¶¶
96-108.
70 AT&T Ex. 58 § 2.9.6.
71 AT&T Ex. 51 § 2.2.4.
72 AT&T Ex. 51 § 2.2.4.
73 AT&T Ex. 51 § 2.2.4.B. (emphasis added).
74 AT&T Ex. 51 § 2.2.4.B.1.
75 AT&T Ex. 51 § 2.2.4.B.2.
76 AT&T Ex. 58; Complaint App. at 11.
77 AT&T Answer, Legal Analysis at 32, ¶ 98; 36, ¶ 105. See
also AT&T Answer at 126-27, ¶ 389. AT&T does not claim it had
reason to believe that AudioText was violating section 2.2.4.B.1
by ``[r]earranging, tampering with, or making connections'' not
authorized by Tariff No. 1.
78 AT&T Ex. 51 § 2.2.4.B. (emphasis added).
79 AT&T Ex. 40, Panagia Decl., at 1, ¶ 1; 2, ¶ 3.
80 AT&T Ex. 40, Panagia Decl., at 2-3, ¶ 5.
81 AT&T Ex. No. 38 (emphasis added); AT&T Ex. 40, Panagia
Decl., at 6, ¶ 17. See also AT&T Ex. 22 (internal AT&T e-mail
communication dated September 14, 2000, from an employee of AT&T
Labs reporting on investigation of the top ten originating
numbers that generated the highest volume of traffic to U.K. PNS
numbers and describing the situation as ``not really a fraud
issue - - - rather an arbitrage/opportunistic issue''); Joint
Statement at 23-24, ¶ 135.
82 Indeed, on the day he decided to suspend AudioText's
service, AT&T in-house lawyer, Schlafly, received an e-mail
communication from an employee indicating that Dun & Bradstreet
considered AudioText to be a ``Low Credit Risk.'' Complaint
App. at 453; Joint Statement at 30, ¶ 166.
In a declaration submitted in this proceeding, Schlafly
claims that, at the time AT&T suspended AudioText's service and
demanded a security deposit, he was concerned about the risk of
``closely held companies'' such as AudioText ``running up a large
bill and then switching carriers,'' leaving AT&T ``with a
substantial uncollectible.'' AT&T Ex. 88, Schlafly Decl., at ¶
14. Schlafly asserts that this ``non-payment risk'' existed
regardless of whether AudioText's traffic was legitimate, id. at
¶ 18, or whether AudioText itself, or one of its downstream
customers, was engaged in ``stimulating false traffic over the
network through the use of autodialers.'' Id. at ¶ 19. This
after-the-fact explanation is not corroborated by the
contemporaneous record and, in any event, does not support the
conclusion that AT&T had reason to believe that its ``Customer
[AudioText] [was] using LDMTS in violation of Section 2.2.4.B.''
of the tariff, that is, ``with the intent to avoid the payment''
of ``[AT&T's] tariffed charges'' at the time AT&T suspended
AudioText's service. AT&T Ex. 58 § 2.9.6; AT&T Ex. 51 § 2.2.4.B.
(emphasis added). The scenarios that Schlafly describes, where a
closely held corporate customer of AT&T runs up a large bill
through legitimate activity, or through the ``false stimulation''
of traffic by a downstream customer, do not involve situations in
which the AT&T customer uses AT&T's service ``with the intent to
avoid the payment'' of AT&T's tariffed charges in violation of
section 2.2.4.B. of the tariff.
83 Joint Statement at 25, ¶ 146.
84 AT&T Ex. 24; Joint Statement at 25-26, ¶ 148-49. Robb
observed in the same e-mail that ``[t]he hitch is, AT&T's tariffs
do not now, but soon will, include language precluding
subscribers from using auto-dialers in this fashion.'' Id.
85 Of, course, AT&T could have amended Tariff No. 1 to broaden
its anti-fraud provisions in July 2000, when AT&T contends it
first learned of ``an emerging scam involving the use of
autodialers to place a high volume of calls . . . to a range of
PNS numbers in the U.K.'' AT&T Answer, Legal Analysis at 35, ¶
104; AT&T Ex. 40, Panagia Decl., at 2 ¶ 3. Instead, AT&T waited
until October 2000 to amend Tariff No. 1 to include an express
ban on the artificial stimulation of traffic. See AT&T Ex. 60 §
2.2.3.D; Joint Statement at 33, ¶ 178. We express no view on the
legal effect of that amendment, or on the lawfulness of AT&T's
conduct after the amendment, as those issues are not before us.
86 AT&T Answer, Legal Analysis at 33-34, ¶¶ 99-102. See also
AT&T Answer at 126-27, ¶ 389.
87 AT&T Ex. 58 § 2.9.6.
88 AT&T Ex. 58 § 2.9.6.A.; Joint Statement at 31, ¶ 171.
89 AT&T Ex. 58 § 2.9.6.A.; Joint Statement at 32, ¶ 172.
Section 2.9.6.A. further provides that the customer's service
``will be reinstated'' if AT&T ``receives satisfactory assurances
within ten days that the customer was not using the service in
violation of § 2.2.4.B.'' or if AT&T receives ``an appropriate
deposit pursuant to Section 2.5.6.'' AT&T Ex. 58 § 2.9.6.A.;
Joint Statement at 32, ¶ 173.
90 AT&T Ex. 58 § 2.9.6. (emphasis added).
91 AT&T Ex. 58 § 2.9.6.A.; Joint Statement at 31, ¶ 171.
92 AT&T Ex. 51 § 2.2.4.B.
93 AT&T Ex. 58 § 2.9.6.A.
94 AT&T Ex. 40, Panagia Decl., at 3, ¶¶ 7-9; AT&T Ex. 41,
Schlafly Decl., at 2, ¶ 5; AT&T Ex. 88, Schlafly Decl., at 2, ¶
5. Although Panagia testified that he reviewed AudioText's
calling records on September 15, 2000, and determined that
AudioText's calling volume, from the time it began receiving
service in February 2000, exceeded 7 million minutes, there is no
indication that Panagia made any attempt to measure calling
volume during a 24-hour period in accordance with the test for
``an extraordinarily high volume of calls'' set forth in 2.9.6.A.
AT&T Ex. 40, Panagia Decl., at 3, ¶ 8. See also AT&T Ex. 41,
Schlafly Decl., at 2, ¶ 5 (making similar reference to 7 million
minute figure); Joint Statement at 21-22, ¶¶ 128-29 (stipulation
regarding monthly call volume billed to AudioText).
95 See Complaint App. at 250. We reject AT&T's contention that
AudioText was subject to a ``monthly minimum usage commitment''
of $20,000 under CT 14363. AT&T Answer, Legal Analysis at 33-34,
¶¶ 100-02, and n.30. Section 3.A. of CT 14363 plainly states
that AudioText was subject to an annual revenue commitment,
called a ``Voice Minimum Annual Revenue Commitment-
International'' or ``VMARC-I'' of $240,000 in the first year of
the contract, and $480,000 in the second year of the contract.
Complaint App. at 250. See Joint Statement at 16, ¶ 96. AT&T's
attempt to convert this annual $240,000 revenue commitment into a
$20,000 monthly commitment is unsupported by the language of CT
14363.
96 Joint Statement at 21-22, ¶¶ 128-29.
97 Joint Statement at 21-22, ¶¶ 128-29; AT&T Answer at 100, ¶
293.
98 See AT&T Answer at 100, ¶ 293; Complaint at 47, ¶ 295.
99 Recognizing that the above calculations yield an average
daily usage figure of 47,571.094 minutes for the period from
September 7 to September 15, 2000, AT&T argues that AudioText
does not deny that it ``may have'' used 167,999.012 minutes or
more in one 24-hour period prior to September 15, 2000, thereby
meeting the threshold for ``an extraordinarily high volume of
calls'' under section 2.9.6.A., as measured by the prior month's
usage. AT&T Answer, Legal Analysis at 34, n.30. This argument
ignores the fact that section 2.9.6.A. requires AT&T to have made
a determination that AudioText was placing ``an extraordinarily
high volume of calls,'' i.e., 167,999.012 minutes in one 24-hour
period, before it suspended AudioText's service. There is no
evidence that AT&T ever made such a determination before it
suspended AudioText's service, and AT&T apparently is unable,
even now, to demonstrate that AudioText's calling volume ever
reached that threshold.
100 AT&T Ex. 58, § 2.9.6.A.
101 See AT&T Answer, Legal Analysis at 34-35, ¶ 103.
102 AT&T Ex. 58 (emphasis added).
103 AT&T Ex. 58.
104 See AT&T Legal Analysis at 29-30, ¶¶ 91-92, citing In re
Gerri Murphy Realty, Inc. 16 FCC Rcd 19134, at 19135-36, ¶ 4
(2001); Buy This, Inc. v. MCI WorldCom Communications, 209 F.
Supp. 2d 334, 336-37, 342 (S.D.N.Y. 2002); Communications Network
Servs., Inc. v. MCI WorldCom Communications, Inc., 573 S.E.2d
461, 463-65 (Ga. Ct. App. 2002); In re Black Radio Network, Inc.
v. Public Serv. Comm'n, 253 A.D.2d 22, 23-26 (N.Y. App. Div.
1999); AT&T Corp. v. FCC, 317 F.3d 227 (D.C. Cir. 2003). See
also Letter from Aryeh Friedman, Counsel for AT&T, to Christopher
N. Olsen, Assistant Chief, Market Disputes Resolution Division,
Enforcement Bureau, File No. EB-03-MD-010 (filed Sept. 18, 2003)
(citing additional authorities).
105 American Tel. & Tel. Co. v. Central Office Tel., 524 U.S.
214, 227 (1998) (citation omitted) (cited in AT&T Answer, Legal
Analysis at 31, ¶ 94). See Marcus v. AT&T Corp., 138 F.3d 46, 58
(2d Cir. 1998) (``Application of the filed rate doctrine in any
particular case is not determined by the culpability of the
defendant's conduct or the possibility of inequitable results.'')
106 AT&T Answer, Legal Analysis at 31, ¶ 94.
107 Although the facts in In re Gerri Murphy Realty, Inc., 16
FCC Rcd 19134, cited in AT&T Answer, Legal Analysis at 29, ¶ 91,
involved a situation in which the carrier had blocked fraudulent
calls made on the customer's line without the customer's
knowledge, the dispute did not concern the carrier's right to
block the calls under the governing tariff, but whether the
customer was required to pay for fraudulent calls made prior to
the blocking.
108 Complaint at 48-49, ¶¶ 304-312.
109 AT&T Ex. 58, § 2.9.6.A. See Joint Statement at 32, ¶ 173.
110 Complaint at 48-49, ¶¶ 306-09.
111 AT&T Answer at 105-06, ¶¶ 306-09.
112 AT&T Answer, Legal Analysis at 46, ¶ 126.
113 AT&T Ex. 58, § 2.9.6.A.
114 See discussion at paragraphs 23-27, supra.
115 47 U.S.C. § 203(c)(3).
116 Because our ruling on Count VI provides AudioText with all
the relief to which AudioText is entitled for AT&T's refusal to
reinstate service, we need not address AudioText's claim in Count
VII that AT&T's refusal to reinstate service also violated
section 201(a) of the Act, 47 U.S.C. § 201(a). See Complaint at
49-50, ¶¶ 313-20. We therefore dismiss without prejudice
AudioText's claim under Count VII of the Complaint.
117 See Complaint at 51-52, ¶¶ 333-40 (Count IX, alleging
unauthorized demand for a security deposit in violation of
section 203(c)(3) of the Act).
118 See Complaint at 53-54, ¶¶ 347-59 (Count XI, alleging
unauthorized demand for payment in violation of section 203(c)(3)
of the Act).
119 Complaint App. at 320; 322 (``Demand Letter''); Joint
Statement at 29-30, ¶ 164.
120 Complaint App. at 320; 322; Joint Statement at 29-30, ¶ 164.
See Complaint at 33, ¶ 197; AT&T Answer at 72, ¶ 197. See also
Complaint at 52, ¶ 337 (contains apparent typographical error
identifying the deposit amount as $828,933 instead of $828,923);
AT&T Answer at 112, ¶ 337 (same).
121 See Joint Statement at 29, ¶ 161; Complaint App. at 309,
330, 332, 375.
122 AT&T Answer at 127, ¶ 392.
123 AT&T Ex. 59 § 2.5.6.A.; Joint Statement at 32, ¶ 175.
124 AT&T Ex. 59 § 2.5.6.A.1.; Joint Statement at 32, ¶ 176.
125 AT&T Ex. 59 § 2.5.6.A.1.; Joint Statement at 32-33, ¶ 176.
126 AT&T Ex. 59 § 2.5.6.A.; Joint Statement at 33, ¶ 177.
127 Complaint at 52, ¶¶ 335-39.
128 AT&T Ex. 59 § 2.5.6.A.; Joint Statement at 33, ¶ 177.
129 See Complaint at 52, ¶ 335; AT&T Answer at 112, ¶ 335. See
also Joint Statement at 21-22, ¶ 128-29.
130 See AT&T Ex. 59 § 2.5.6.A. (providing that the amount of the
security deposit ``will not exceed three times the sum of the
estimated average monthly usage charges and/or the monthly
service charges.'')
131 Complaint at 52, ¶ 338; AT&T Answer at 113, ¶ 338.
132 AT&T Answer at 113, ¶ 338; see id. at 72, ¶ 198.
133 AT&T Ex. 88, Schlafly Decl. at 4, ¶ 15.
134 Complaint App. at 320; 322. See Complaint at 33, ¶ 197;
AT&T Answer at 72, ¶ 197. Because AT&T made it clear that
payment of a deposit of $828,923 was a condition for restoring
service, we find no significance in the fact that the Demand
Letter stated that AT&T was ``requesting'' a deposit of $828,923,
rather than stating that AT&T was ``demanding'' such a deposit.
Complaint App. at 320; 322. The Demand Letter left no doubt that
this was a ``request'' that AudioText could not refuse if it
wished to continue doing business with AT&T. Further, in a
subsequent letter to AudioText, AT&T's own counsel referred to
AT&T's prior ``demand'' for payment of a deposit, apparently
finding no significance in the fact that the earlier letter
referred to a `request.' See Complaint App. at 327.
135 Complaint App. at 323-24.
136 Complaint App. at 327. In view of Schlafly's September 26,
2000 assertion that AT&T had sent AudioText a ``demand'' for
payment of a deposit calculated based on the recent usage,'' it
is unclear why Schlafly had earlier advised AudioText's counsel
that ``AudioText needs to provide an estimate of its
extraordinarily [sic] usage so that an adequate deposit amount
may be established.'' Complaint App. at 321; Joint Statement at
26, ¶ 150. As AT&T apparently had its own records regarding
AudioText's ``recent usage,'' we do not understand why AT&T would
have needed AudioText to provide an estimate of its usage in
order to establish an appropriate deposit amount.
137 Complaint App. at 327.
138 Complaint App. at 329.
139 Further, nothing in the language of Section 2.5.6. of Tariff
No. 1 would have suggested to AudioText that AT&T's demand for a
$828,923 deposit was negotiable. Section 2.5.6. states that
``When a deposit is required, [AT&T] will provide a written
notification of the amount of the deposit and an explanation of
the reason(s) for the deposit requirement.'' Complaint App. at
5. The Tariff does not suggest that AT&T will notify a customer
of the requirement to pay a deposit by proposing a deposit amount
that will then be subject to negotiation.
140 American Tel. & Tel. Co. v. Central Office Tel., 524 U.S. at
223 (quoting MCI Telecommunications Corp. v. American Telephone &
Telegraph Co., 512 U.S. 218, 229 (1994)).
141 Because our ruling on Count IX provides AudioText with all
the relief to which AudioText is entitled for AT&T's unauthorized
demand for a security deposit, we need not address AudioText's
claims in Count VIII and X of the Complaint that AT&T was not
authorized to demand a security deposit of any amount under
Tariff No. 1 because AudioText did not have a proven record of
late payments to AT&T, and its financial responsibility was a
matter of record (Count VIII), and because the tariff did not
permit AT&T to demand a deposit based upon the volume of traffic
a customer generates (Count X). See Complaint at 50-51, ¶¶ 321-
32; id. at 52-53, ¶¶ 341-46. We therefore dismiss without
prejudice AudioText's claims under Counts VIII and X of the
Complaint.
142 Complaint App. at 320; 322; Joint Statement at 29-30, ¶ 164;
Complaint at 33, ¶ 196; AT&T Answer at 72, ¶ 196. As noted
above, the Demand Letter also stated that AudioText's account was
past due in the amount of $41,202.13. This was apparently an
error. See supra at ¶ 40.
143 Complaint at 54, ¶ 351; AT&T Answer at 116, ¶ 351.
144 See Joint Statement at 29, ¶ 161.
145 Complaint App. at 5.
146 Complaint at 54, ¶ 359.
147 AT&T Answer at 127, ¶ 393.
148 AT&T Answer, Legal Analysis at 53, ¶ 139. We find no legal
significance in the fact the Demand Letter stated that AT&T was
``requesting'' that AudioText pay $167,585.80 in full ``to bring
the account current,'' rather than stating that AT&T was
``demanding'' that AudioText pay that amount. Complaint App. at
320; 322. Indeed, AT&T admitted, in response to AudioText's
claim in Count XI, that it had ``demanded that AudioText bring
its account current. . . .'' See AT&T Answer at 118, ¶¶ 356-57;
Complaint at 54, ¶¶ 356-57.
149 As noted supra at n.83, our ruling herein does not address
the lawfulness of AT&T's conduct following amendment of Tariff
No. 1 in October 2000.
150 We make no ruling on Counts I, II, III, and XII of the
original Complaint because AudioText has withdrawn these counts.
See supra at ¶ 18.